Census Check: The Race & Gender Gap
There's no question the advisory industry lacks diversity. Nonwhite faces are hard to find; white, male advisors are the norm.
Census Bureau estimates comparing U.S. racial demographics with racial demographics of advisors show the discrepancy is big. Financial Planning's research conducted this summer and based on government statistics -- has found it may be even bigger.
Non-whites are expected to account for about 40% of the U.S. population by 2025, according to the Census Bureau. It has projected that whites will no longer make up the majority by 2043. "For the advisory industry to truly flourish, it must be reflective of the very people it is trying to serve," says Manisha Thakor, chief executive of MoneyZen Wealth Management, an RIA based in Santa Fe, N.M.
According to 2010 Census estimates, whites and Asians are more common among advisors than they are among the population overall. Whites make up 80.3% of the advisor population and 64.7% of the general population, while the numbers for Asians are 6.1% vs. 4.6%.
Women, too, are underrepresented, making up 30% of advisors and 51.5% of the population.
Meanwhile, African Americans, Hispanics and others make up a significantly smaller percentage of advisors than of the U.S population. African Americans account for 6.1% of advisors and 12.2% of the general population; Hispanics 6% and 15.7%, respectively.
At RIAs, however, the number of black advisors may be as low as 1% to 2%, according to Financial Planning's research and interviews. At larger firms, according to a 2011 SIFMA survey of 18 firms, 8% of brokers or financial advisors were people of color, a far broader category.
People in the industry also claim that the racial divide is even more pronounced than the Census estimates, with whites being even more dominant than the census reveals and blacks being even less of a percentage of the advisory industry. I have been going to industry conferences for the past 15 years. I continue to see a sea of white, says George Papadopoulos, an RIA based in Michigan. We need to do a better job as an industry to address this, we clearly have a problem.
The big footnote in all of this data is how the Census Bureau determines a personal financial advisor. The term "personal financial advisors" is defined by the U.S. Census Bureau as those who advise clients on financial plans using knowledge of tax and investment strategies, securities, insurance, pension plans and real estate. Duties, according to the Census Bureau, include assessing clients' assets, liabilities, cash flow, insurance coverage, tax status and financial objectives. Professions included within the category include estate planner, individual pension advisor and personal investment advisor. "Personal financial advisors" include advisors who work at RIAs, wirehouses and banks.